An expert view from Salmaan Jaffery, Chief Business Development Officer, DIFC Authority
Innovation, underpinned by new business models and technology, is impacting the entire insurance value chain. The insurance and reinsurance industry continues to experience unprecedented change.
The pace at which the industry is changing in the digital age has created new considerations and anxieties for insurers. In a survey from Accenture, 78% of insurance executives believed that they are exposed to more risks than they are equipped to handle as they move to become digital businesses. Consumers increasingly want the benefits of digital, meaning better decision making all around.
Competition is accelerating digitisation in terms of products, processes and services. A 2015 Bain survey also found that 20-40% of physical activities (e.g. assessing risk, driving good behaviour, considering claims and encouraging information sharing) in insurance will be transitioned to digital. IT infrastructure needs to keep up. The ‘internet of things’ and ‘big data’ means more data is needed from multiple sources. This data needs to be assessed, processed and utilised.
Some pundits even see telematics, effectively smart technologies that can assess how an individual behaves and the risks they expose themselves to, as impacting up to 15% of insurance.
Innovation is also driving new lines of business. The creative economy, space, artificial intelligence, mega infrastructure projects, and 3D printing mean emerging and relatively young sectors need insuring. Take driverless cars. New risks are in play in real-time. What is the risk to the driver? Was it a manufacturer’s risk? How do new regulations address these risks?
The opening up of new markets in the Middle East, Africa and South Asian market is also resulting in very specific risks that have not been addressed before. Cyber security, geopolitical instability, security risks, increasingly complex supply chains and even the demand for alternative mechanisms have resulted in an increase in Cyber Risk Cover, Trade Credit Cover, Terrorism Cover and Crime Cover.
As a result, estimates suggest the GCC’s insurance sector is expected to reach $62.1bn by 2020 and to grow at a compound annual growth rate of 18.7% between 2014 and 2020.
New markets call for different action. From DIFC we are seeing not just risks being underwritten in the Middle East and North Africa but also in Sub-Saharan Africa, with organic growth in Kenya, Nigeria, Zambia, Ghana and Mozambique. The penetration of these markets for commercial risks and motor are still in the early stages but have a huge potential to grow.
The aggregation of new players in regional insurance hubs, such as the DIFC, UK platforms like Lloyd’s and the establishment of the DIFC Insurance Association are helping the industry continue to innovate.
We are excited to encourage and participate in this next wave of innovative growth.